America: subprime nation?

Saturday

Jan 19, 2008 at 12:27 AMJan 19, 2008 at 6:22 AM

By Pat BuchananCreators Syndicate

Since it began to give credit ratings to nations in 1917, Moody's has rated the United States triple-A. U.S. Treasury bonds have been seen as the most secure investment on earth. That reputation is now in peril.
Last week, Moody's warned that if the United States fails to rein in the soaring cost of Social Security, Medicare and Medicaid, the nation's credit rating will be down-graded within a decade.
Our political parties seem oblivious. Republicans, save Ron Paul, are all promising to expand the U.S. military and maintain all of our worldwide commitments to defend and subsidize scores of nations.
Democrats are proposing a new entitlement - universal health coverage for the near 50 million who do not have it.
California has already hit the wall. With an economy as large as a G-8 nation, the Golden State is looking at a $14 billion deficit in 2009 and a $3 billion shortfall in 2008. Gov. Schwarzenegger has called for slashing prison staff by 6,000, including 2,000 guards, early release of 22,000 inmates, and a 10 percent across-the-board cut in all state agencies. The Democratic legislature is demanding tax hikes.
Meanwhile, Washington drifts mindlessly toward the maelstrom. With the dollar sinking, oil surging to $100 a barrel, the Dow dropping, foreclosures mounting, credit card debt going rotten, and consumers and businesses unable or unwilling to borrow, we appear headed into recession.
If so, tax revenue will fall and spending on unemployment will surge. The price of the stimulus packages both parties are preparing will further add to the deficit and further imperil the U.S. credit rating. This all comes in the year that the first of the baby boomers, born in 1946, reach retirement and eligibility for Social Security.
To stave off recession, the Fed appears anxious to slash interest rates more. That will further weaken the dollar and raise the costs of the imports to which we have become addicted. As we save nothing, we must borrow both to pay for the imported oil and foreign manufactures upon which we have become dependent.
We are thus in the position of having to borrow from Europe to defend Europe, of having to borrow from China and Japan to defend Chinese and Japanese access to Gulf oil, and of having to borrow from Arab emirs, sultans and monarchs to make Iraq safe for democracy.
We borrow from the nations we defend so that we may continue to defend them. To question this is an unpardonable heresy called "isolationism." And the chickens of globalism are coming home to roost.
We let Europe get away with imposing value-added taxes averaging 15 percent on our exports to them, while they rebate that value-added tax on their exports to us. Thus, the euro has almost doubled in value against the dollar in the Bush years.
We sat still as Japan protected her markets and dumped high quality goods into ours and China undervalued its currency to suck jobs, technology and factories out of the United States. Now, China and Japan have $2 trillion in cash reserves. The Arabs have an equal amount of petrodollars. Both are headed here to spend their depreciating dollars snapping up U.S. assets.
America, to pay her bills, has begun to sell herself to the world.
Gutted by the subprime mortgage crisis, Citicorp got a $7.5 billion injection from Abu Dhabi and is now fishing for $1 billion from Kuwait and $9 billion from China. Beijing has put $5 billion into Morgan Stanley and bought heavily into Barclays Bank.
Merrill-Lynch, ravaged by subprime mortgages, sold part of itself to Singapore for $7.5 billion and is seeking another $3 billion from the Arabs. Swiss-based UBS, taking a near $15 billion write-down in subprime mortgages, got $10 billion from Singapore.
Bain Capital is partnering with China's Huawei Technologies in a buyout of 3Com, the U.S. company whose technology protects Pentagon computers from Chinese hackers.
This self-indulgent generation has borrowed itself into unpayable debt. Now the folks from whom we borrowed to buy all that oil and all those cars, electronics and clothes are coming to buy the country we inherited. We are prodigal sons, and the day of reckoning approaches.
Pat Buchanan writes for Creators Syndicate.

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